Hungary insists its 7% levy on domestic bank holdings of its bonds is not a default.

The IMF vows to make its research more open-minded (though IMHO the research output is more open-minded than the rest of the Fund?)

When National Statistics and the Greek Civil Service collide: ELSTAT staff are asked to sign a confidentiality statement (page 2 here) to the effect that they will not reveal individual-level micro-data to third parties, including the government or the courts. Incredibly the staff see a conspiracy behind this and Greek MPs take the matter to Parliament. ELSTAT is forced to issue a statement of the self-evident. My only question is what the hell are these people doing working for a National Statistics Agency?

Sunday, 16 June 2013

Having spent much of the last couple of days hearing that state television is what separates us from the animals, I thought I'd expand on the topic a little further than I did in my original post on the ERT reboot . Sadly people busy licking the boot of the Big State (while deploring the non-socialist foot currently in it) have no time to dig up evidence. Although I am often told by such folk that one needs professional journalists in order to discuss any news in depth, I thought I'd risk voiding the manufacturer's guarantee on my brain and do it myself.

As chance would have it, a massive international team of researchers published last year a study of the effect of public broadcasters on the public's knowledge of hard and soft facts. No, it doesn't cover Greece, unfortunately. It's based on a large survey of people's knowledge of current affairs in six countries (with fully comparable data for five by the looks of it). You can check out a study on audience perceptions based on the same data here. Spoiler: old people like public broadcasters the most.

Overall, the researchers found that the general trend is for audiences with exposure to public broadcasters to be more knowledgeable of 'hard' facts (politics, economics, international affairs, etc) and no less knowledgeable of 'soft' facts (gossip, celebrities, etc). You can see their comparisons on the right. This was not always the case of course - in Italy, for example, the only Southern European country surveyed, the opposite was true - exposure to public broadcasting meant people were less knowledgeable - and this in a country where people who trust television are reliably more likely to trust Silvio Berlusconi. A similar effect was found in (South) Korea, where exposure to public television did not make people less knowledgeable but did contribute less to their knowledge than exposure to private television. How come?

Well, the researchers found that it was the de jure independence of public broadcasters that explained most of their ability to educate the public. This correlation was so much stronger than the correlation between public funding (i.e isolation from the corrosive powers of competition, neoliberalism and all the other supposed evils of the world) and educational value that independence wins hands down. Compare for yourselves below:

So this leads us, ultimately, to what we all seem to agree on: if you must have a public broadcaster (and I don't believe we must), then it needs independence in order to work. What is this de jure independence mentioned in the graphs, I hear you say? Well it's a measure of the level of legal protection for public broadcasters choosing to broadcast things their Governments don't like. A proxy, after all, for de facto independence. For a fuller discussion, see here.

In fact, given insufficient independence for the public broadcaster, insufficient quality among the private broadcasters, and endless interference and cross-subsidy by rent-seeking business interests, perhaps Greece needs to borrow an African perspective on this debate after all. Or maybe we should revisit why private television (which nobody proposes to ban - yet) is more successful in educating the public in Japan than elsewhere, despite producing those dreadful cringy or semi-pornographic game shows you hear about from time to time.

UPDATE: I'm going to try to get hold of and analyse the data for the latest Eurobarometer report on the use of media in the EU. While this doesn't examine the issue of public broadcasters in detail, I hope it can be used to demonstrate the extent to which broadcasters in general are being sidestepped by young people.

In the meantime, please consider the following typology of possible types of broadcaster (sourced from here), and try to consider where our new ERT should be, in your view. It's more than most people will ever do.

As officials openly admit, the decision was motivated not simply by cost-cutting concerns but also (primarily, I would add) by the Government's inability to get an early-retirement and voluntary redundancy deal out of the ERT unions. Essentially the Government decided that it was easier to reboot the organisation and pay everyone's compensation than try to clear the obstacles to restructuring - which was in any case true, but a poor basis on which to act.

Perhaps Samaras sees this as some kind of Thatcher moment, a Mother of All Battles against entrenched interests. Whatever the financial or ideological case for binning the public broadcaster (and I am entirely sympathetic to getting rid of compulsory funding for ERT and freeing it from political interference, indeed even shutting it down for good), he is wrong on this matter. This is not his Thatcher moment. It is his one more stepping stone to the loss of all legitimacy as Prime Minister.

The decision was, by all accounts, taken with significant disregard for checks and balances, although, as it turns out, within the letter of the law. The Greek Government failed to consult Parliament prior to acting (not a legal obligation but surely an indication of good governance, as you'll see below), and has yet to appoint a professional administrator. The major coalition party, New Democracy, apparently even made a point of sneaking it in behind the backs of its junior coalition partners, who are now playing the only card they have by threatening to withdraw their support from the coalition, triggering a new election that all three coalition partners have sought to avoid. I doubt they will follow up on their threats.

NOTE: I have amended the following section significantly on 15/6/13 thanks to a very helpful note by a commentator. See below, and his blog, for details.

The decision to shut ERT down was enacted through a Joint Ministerial Decision (full text in Greek here) on 11 June, a treatment that was made possible back in 2011, when the 2005 law on the management of public enterprises was amended to allow for the closure of loss-making public enterprises. The Joint Ministerial Decision, however, was preceded through a novel legislative instrument (a Legislative Act) established a single day before the ERT intervention (full text in Greek here, although only temporarily), which grants the Government the power to effectively act as the administrator of the failed body through provisions in the original JMD shutting it down. This amendment is meant to ensure that public sector bodies can be 'rebooted', spending a little time in administrative purgatory in the care of government, as opposed to a professional administrator.

The use of a Legislative Act has caused a great deal of controversy: such instruments are explicitly reserved by our Constitution for use in "extraordinary cases of urgent and unforeseen need" because, while they still require approval from Parliament within 40 days, they do provide the Government with a licence to act on them in the meantime. Hence their use in compliance with medium term plans is a contradiction in terms, unless perhaps one argues that it is the unions' unwillingness to compromise that is so 'extraordinary and unforeseen' as to justify such measures. Even this bit of mental gymnastics is hard to defend (who could fail to foresee turkeys voting down Christmas?) and will probably not be upheld by the Council of State in the inevitable referral to come.

18/06/13 UPDATE: As expected, the Council of State ruled against the Government and struck down the 11/6 Legislative Act, although it did uphold the JMD mandating the closure of ERT.

In any case, I am told that such instruments have been used 19 times in the current crisis. Others (here) claim that the figure is much lower, i.e. 4 in the last eighteen months. Some, such as the act establishing our original bailout agreement, could justifiably be said to address unforeseen and urgent circumstances. But such proliferation (even if the latter figure is correct) is unjustified.

To clarify, the Legislative Act (as my reader correctly points out) does not authorise the closure of ERT. It does something else entirely.

You see, the Government has indicated (both in the original JMD and via a self-leaked non-paper) that it will re-establish the national broadcaster under a new identity and on a more rational basis as soon as possible. This is essentially the purpose of the Legislative Act - it allows the government to oversee the process of administration though a Joint Ministerial decision. In this case the JMD went out of its way to ensure that, while all other obligations of the now-defunct public sector body are taken on by the State, the employment contracts of all of its staff (including those seconded to other bodies) are automatically ended, and it will have to cease broadcasting.

As I mentioned earlier, the Legislative Act regulating administration could be overturned by Parliament. If this happens, the Greek Government's decision to close ERT will not be overturned. What will happen, is that the legal framework for its administration, the employment status of ERT's laid-off staff and its right to broadcast will come into question, in a pretty costly and time-consuming way. It's also to some extent a political ploy or poison pill on behalf of the Government, as those protesting the closure of ERT will now stand accused of interfering in the establishment of the new ERT, and the handover of the defunct ERT's assets.

What motivated this fairly authoritarian treatment? Well the obvious driver is the fact that Government and the unions were unlikely to ever reach an agreement, and public consultation would have prompted a new wave of protests in early summer (a volatile time) that would pile pressure on the governing coalition. However, people are also suggesting that this is a matter of:

bolstering the Government's reformist credentials in the aftermath of the failed sale of DEPA, our state natural gas company (said sale having failed after the Russians were unable to extract a guarantee that we would suspend European Competition rules to ensure rent-seeking potential should their bid succeed

ceding valuable intellectual property (such as, I would expect, the ERT video archive) to favoured private interests in a non-transparent manner, or

dumping the disaffected old Party Faithful who make up some of ERT's current staff and replacing them with grateful new captive voters.

I really can't comment much on these scenarios, except to say that 1) is out of the question - even the dystopian inbreds running ND must realise that this move would create tons of bad publicity, not to mention saving much less money than the DEPA sale was intended to bring in. 2) is testable - a lot hinges on how soon an administrator will be appointed and who this will be; note that the JMD gives the administrator the right to establish contracts on behalf of the State - I'm not sure why; 3) is less testable in practice but the way in which new ERT jobs are advertised in future could give us some hints.

Would ND be willing to risk an election? Recent polls suggest that a barrage of slightly fishy-sounding good news coming out of Greece had given New Democracy some breathing room in early June, making it possible to risk a new round of elections, but I doubt any of the three coalition partners would consciously take such a risk - losing the elections would, after all, spell the end of the political careers of an entire generation of politicians, while winning would only buy them more time to (possibly) capitalise on an extremely weak recovery.

Update: A good and balanced roundup by Nick Malkoutsis of the reactions to the ERT closure can be found here. I am not too concerned with the ensuing protests because they have flattened a complex issue into a very simple one; they would be useless as a guide to future policy, as indeed most protests tend to be.

A LITTLE BIT OF BACKGROUND

ERT (key financial figures here) was Greece's public broadcaster, and first went live in February 1966, barely a year before the junta took over, entrenching within ERT a dirigiste legacy for years to come. State broadcasters generally tend to thrive in wartime or martial-law environments. Similarly, Greek public radio was actually first set up in 1938, under the fascist regime of I. Metaxas (more history here). For a brief overview of the broadcaster's checkered record up to the 90s, see this paper. A killer fact is that in the 80s the average tenure of an ERT director was 8 months (source).

Arguably the first breath of fresh air came in 1998 when the company's first-ever medium term strategy was set in motion and its first early-retirement plan was put into place, freeing up resources for (gasp!) programming. The culprit behind this evil neoliberal scheme to make ERT into a serious broadcaster were none other than one of Satan's Big Four imps, KPMG (see here for a detailed history of their involvement). For once, their consulting really seemed to pay off - unless perhaps ERT's emancipation was a fruit ripe for the picking.

The parties' reliance on TV for influence was to prove their undoing - as documented here, the change of channels resulted in a loss of grassroots rapport, creating a vicious circle where the population was becoming increasingly alienated and parties in turn had to rely more on television to reach them. Meanwhile, trust in politicians, TV and the press went into synchronised diving mode, as the Eurobarometer figures below demonstrate (note the lines indicate % of Greeks mistrusting):

This shift probably contributed, along with shifting public spending priorities, to the change in Greek voters' attitudes towards the political process in general, as documented here. In fact, the frustrated longing for an unmediated engagement with political parties could be fuelling part of the mafia-style growth of parties such as Golden Dawn, as well as the personality cult silliness of the Independent Greeks.

Despite what ERT's early history might suggest, ERT advocates argue that a state broadcaster is necessary if the people are to have access to objective information - the kind that is crucial to informed political decisions and action. Clearly, and, assuming de facto independence is possible for a state broadcaster, their argument has some merit in Greece, if not elsewhere. I have briefly examined that claim here, and found it to be missing the point slights (it's independence, not state subsidy, that makes public broadcasters good for democracy).

That aside, it's fair to say Greek private television is for the most part not in the business of producing television programming. Rather the stations (which are unreasonably numerous, and even the largest of which are unlicenced and unprofitable) are fronts for a much less wholesome machine of political influence and are cross-subsidised from rents extracted from the State through other arms of their owners' business empires. Such rent-seeking is in turn made possible through the influence of the media on voters' perceptions, hence ensuring that the TV stations do, in fact, earn their keep.

This is partly the outcome of a botched liberalisation of TV stations back in the 80s and 90s, of which a good summary is available here and here (pg. 252 onwards). Note that I am always in favour of liberalising broadcasting, indeed all services, and even today's ERT advocates would have struggled to argue against it in principle. But in the absence of reliable institutions, liberalisation doesn't always deliver what one might have hoped for, and it is hard to distinguish a bona fide liberalisation initiative from a plan for tailored de-regulation that enshrines rent-seeking opportunities. This is, in fact, Greece's problem in a nutshell: reforms are needed to drive growth now, but are predicated on institution-building that could take a generation; and a bad reform is occasionally worse than no reform.

To summarise, my take on the ERT affair is this: Samaras has taken a huge gamble, risking self-immolation via the ballot box in order (I guess) to rebuild some of ND's lost clientelist network. Motivations aside, his crime lies not in wanting to do away with ERT, or even in using an unorthodox means for doing so (the reboot method), but in his cavalier attitude towards the Constitution and for Parliament, which feeds into a disturbing pre-existing pattern. Regardless of how cost-effective ERT's successor turns out to be, this precedent is shameful and risks discrediting any decisive future reform as an institutional coup.

Interim findings from a global survey of finance professionals, with a module on the Cyprus bail-in (disclosure: I am the editor of the survey). This is based on the first 919 responses but about as many again will respond by the end of the month. Also this is only one of four questions asked.

The LOLGreece tour continues with a small presentation on the effects of Basel III in Bucharest. For more on this obsession of mine see here or here (in Greek).

The European Commission's Consultation on the Long-Term Financing of the EU Economy is underway. I'm preparing a response in my professional capacity.

A moment of pure Greek madness (in Greek) as 12 members of staff (some formerly Union leaders) at the Municipality of Mesologgi have blocked the entire organisation's payroll since 22 May in protest of the Municipality's inability to compensate them for years of unpaid benefits in one lump sum. Note the reporting: references to the '178 Euro benefit' is taken as understood by all readers.

More credit rating agencies enter the European market: apparently Dagong has won its EU licence after all.

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